Signing a commercial lease is often much more complicated than signing a residential lease for a property. While residential leases often involve either renting on an annual or month-to-month basis, commercial leases often extend for two, three or even five years.
In some ways, this is beneficial, because you know you can build your business up in a secure location at the same rental rate for years. On the other hand, you have to worry about meeting that financial obligation if your business changes or closes.
Another factor that is substantially different is how tenants pay for the costs and fees associated with their rental property. For residential tenants, these costs are typically included in their rent if the landlord provides services like snow removal or lawn maintenance. In other situations, the tenant may agree to pay an outside professional or manage these services on their own for the duration of the lease. With commercial leases, however, these expenses are often bundled into what are known as CAM fees.
What are CAM fees?
CAM is an acronym for common area maintenance. These charges relate to maintaining shared spaces, like the parking lot, the entrance to a shared office building, sidewalks or the mechanical systems of a building. They may also include landscaping services, window cleaning or even the cost of a front desk security guard.
These fees are charges in addition to the actual rent you agree to in your lease. Landlords typically handle these charges in one of two ways. Sometimes, they charge each tenant a flat rate each month or quarter for CAM fees, usually outlined in the lease or a secondary agreement.
Other times, CAM fees are more exact, based on the actual expenses that the management of the shared spaces incurs. In these scenarios, each tenant will typically pay a percentage of the total costs, based on the amount of the building they use and the amount of traffic coming in and out of their unit.
You may have the flexibility to negotiate CAM fees with a landlord
While you probably can't find high quality commercial rental units that don't also have CAM fees associated with their rent, that doesn't mean paying huge amounts for maintaining a property is a given when you sign a commercial lease. You may have the option of negotiating with the landlord for more favorable terms.
A landlord who absolutely will not flex about the amount of rent may be willing to work with you about the amount you owe each month in CAM fees. Negotiating your CAM fees could make renting more affordable.
It's essential that you consider both rent and CAM charges when determining what rental spaces are best for your business. Overlooking CAM fees could leave you in a less affordable unit or financially responsible for more than you want to spend each month.